Porcini's Pronto Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Background

Porcini's Inc. started its operations from Boston’s North End 1969 and expanded its business to Hyannis, Massachusetts, Harford, Connecticut etc. Porcini's Inc. was acquired by private investors in 1989. New management started to expand company’s business to shopping mall and downtown locations. Financial performance of Porcini's Inc. was very good and Porcini's Inc.’s revenues and profits were increasing every year. Profit margin had increased from 3% to 4%. Porcini's Inc. had 23 outlets and workforce of 954 employees.

Food quality and service quality was the main focus of Porcini's Inc.’s top management. Porcini's Inc. had experienced staff and they had been with the company for a long time. Porcini's Inc. had well known chef Mariana Molise that had created menu for the company and had trained all chefs from different outlets. Food quality, outlet ambiance and quality service had differentiated Porcini's Inc. from its competitors and helped to won “Best Chain Service” for four times.

Problem Statement

Restaurant business had reached saturation point and there was no further growth exist for Porcini's Inc. Porcini's Inc. had three options to expand their business but there were some risk associated with every options like required return, high quality food and high quality services.

Problem Details

Porcini's Inc. wanted to expand its business because Porcini's Inc.’s existing market had reached the point of saturation. Porcini's Inc. was not able to expand its business to global market because they did not have enough capital for it. Due to insufficient resources, Porcini's Inc. started to find the opportunities in the local market but prime sites were not available for Porcini's Inc.

Management decided to target highway travelers by introducing limited-menu outlets. This segment was already being served by many competitors and it was difficult for the Porcini's Inc. to attract customers to its outlets. There were many challenges for the management, which raised many questions like would company be able to provide high quality food and services at reasonable price? Would Porcini's Inc. be able to survive that intense competition? Would Porcini's Inc. be able to get 6% return?

Analysis

Qualitative Analysis

In order to analyze the current position of Porcini's Inc., first we would analyze the internal environment of Porcini's Inc. For this purpose, SWOT matrix was used (See Exhibit 1 in the appendix).

Strengths: Porcini's Inc. was known for its high quality food and they used fresh vegetables. Porcini's Inc. was also known for its high quality service and Porcini's Inc. had experienced staff as well. In addition, it also provided unique ambiance.

Weaknesses: Porcini's Inc. could not enter into the global market because Porcini's Inc. did not have sufficient capital to invest and Porcini's Inc. was not a recognized brand.

Opportunities: Porcini's Inc. had many opportunities, they could target highway travelers by providing a product that could be differentiated from its competitors. Franchising was common in the industry and Porcini's Inc. could avail that opportunity. Syndication was also common in the industry and Porcini's Inc. could take advantage of this opportunity in order to find the investor.

Threats: There were many threats exist in the industry like the industry had reached the point of saturation and the industry growth was very low. Cost of food as well as wages rate were increasing and per capita of disposable income was decreasing. These were real challenges that Porcini's Inc. was facing.

External Analysis

For external analysis, PEST model was used (See Exhibit 3 in the appendix). Per capita income was decreasing; which meant people would not be able to pay high prices. Wage rate and food cost was increasing; this indicated that the cost of the product would increase and the profit margin would decrease. Less revenue would be generated because people had become health conscious. Technology had played an important role in the restaurant industry to reduce process time. Swipes of credit card could help the companies to reduce payment process time.

Industry Analysis

Restaurant industry was divided into three segments and these segments include: fast food, single location full-service restaurant and full-service restaurant. There were 300,000 restaurants in the fast food segments and the revenue of the segment was $184 billion with profit margin of 3.5%. It was forecasted that this segment would grow by 2% from 2011 to 2015. There were 200,000 restaurants in the single location full-service segment and the revenue of the segment was $89 billion. It was forecasted that this segment would grow by 2.8% from 2011 to 2015. There were 33,400 restaurants in the full-service chain segment and the revenue of the segment was $53 billion. It was forecasted that this segment would grow by 2.5% through 2016. Full service chain segment was not paying attention on concentration and the segment was made up of many participants. In addition, no participants had significant market share.

In order to find the attractiveness of restaurant industry, Porter’s five forces model was used (See Exhibit 2 in the appendix). Threat of new entrants was low because large capital was required and market was already saturated. It would be difficult for the new entrant to find the prime location in the downtown or nearby shopping mall.............

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